Bill aims to lower state spirits tax

Murrow News ServiceFebruary 26, 2014 

OLYMPIA -- The owner of Black Heron Spirits in West Richland says he routinely hears about people driving across state lines to buy liquor because it's cheaper.

Mark Williams, who owns the distillery, may hear about fewer such trips if a new bill gains traction in the Washington state Legislature.

Senate Bill 6547, introduced Wednesday at an Olympia news conference, would reduce the state's excise tax on spirits by 14 percent over the next eight years.

"The voters did not get what they wanted," said Sen. Janea Holmquist-Newbry, R-Moses Lake, of the state's transition to private liquor sales in 2011.

Consumers and businesses are now paying more than five times the national average in spirit sales taxes, Holmquist-Newbry said.

Those consumers are not just purchasing liquor out-of-state, but other goods as well, Holmquist-Newbry added. The bleeding of state money needs to stop, she said.

"We are chasing our consumers out of our state," she said, adding that as consumers have fled to neighboring Oregon and Idaho for liquor, some employers in the industry have been forced to close their doors.

Idaho has captured at least $10 million in spirits revenue from Washington customers, she said.

David Osgo, chief economist for the Distilled Spirits Council, said Washington's spirits tax was the nation's highest even before privatization, at more than $27 per gallon. It's now more than $35 per gallon, he said.

By comparison, Idaho's spirits tax is $10.92 per gallon. Oregon's spirit tax is the nation's second-highest, at $22.73 per gallon.

Osgo said the tax goal behind privatization should have been revenue neutrality, but instead it has resulted in revenue increases.

In the three years prior to privatization, the state brought in $300 million annually through a combination of profits, sales taxes and excise taxes, he said. In 2012, that number increased by about $75 million.

The legislation would cost the Department of Revenue $21.3 million during the 2015-17 biennium, but Holmquist-Newbry said state coffers can expect to add $80 million annually when tax reductions take full effect in eight years.

"We're going to be better off than we were prior to privatization," she said.

Although the cut-off for passing bills in their house of origin has already passed, Holmquist-Newbry said she was optimistic that a "healthy dialogue" could be established in the Legislature before the session officially ends March 13.

Williams said he wishes the tax reductions would be implemented less gradually, but he won't complain.

"Any reduction of the state liquor taxes is a bonus in my eyes," he said.

Holmquist-Newbry also was joined by representatives of several craft distilleries, including Josh Mayr of Aberdeen's WishKah River Distillery, and Ian MacNeil of Seattle's Glass Distillery.

Despite having 70 licensed craft distilleries, more than any other state, Mayr said Washington's tax system is punitive to distilleries, making it difficult for them to prosper and grow.

Some distilleries, he added, are choosing to export their spirits to other states because it is more profitable.

MacNeil said reducing tax rates isn't about taking money out of the state's pocket, but helping both distillers and consumers.

With current tax rates, consumers often will choose to buy less expensive products, bypassing more expensive local options entirely, MacNeil said.

-- Tri-City Herald intern Matt Benoit is a Washington State University student: 509-947-9277, mbenoit@tricityherald.com; Twitter: @Matt_Benoit_

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